The automotive industry is undergoing the biggest upheaval in its history, according to Roland Berger. The strategy consultancy says that e-mobility, autonomous driving, and the increasing digitalization of vehicles are forcing OEMs and suppliers to adapt their business models to radically changed conditions. In a study titled “Automotive suppliers: achieving resilience and getting ahead in a challenging world,” Roland Berger analyzed the situation of 35 organizations in the automotive industry based on its concept for robust organizations.

“Robustness means the ability of organizations to adapt and evolve, to overcome uncertainties, and to preserve their ability to function, their competitiveness, and their long-term growth,” said Ina Wietheger, Partner at Roland Berger. “In other words, this means that companies have to be in a position to persist even when the foundation of their operating model changes.”

Traditional automotive suppliers face numerous challenges, and the conditions that the automotive industry operates in are fundamentally changing. The study’s authors identified a number of main drivers of this transformation.

The trend towards e-mobility is continuing to gain momentum, not least because of more stringent international emissions guidelines.

The industry is also being affected by the increasing digitalization of vehicles. Software is becoming more important than hardware, and this is compelling companies to rethink their own role in the value chain and requiring a significantly greater dynamic in development.

The question of the technology that is used is becoming increasingly significant for investors too. Capital flows are moving to different places as lenders are steering clear of old technologies.

The preferences of OEMs are evolving in the sense that they are now subjecting their make-or-buy decisions to greater scrutiny. This is forcing suppliers to expand their own product offerings.

Another factor placing companies under pressure is the sharp rise in the cost of raw materials and resources. The situation is being exacerbated by the demand for transparency in the supply chain and by higher sustainability requirements.

“Ultimately, the consequence of these factors is that almost all suppliers—but especially those of traditional powertrain components—are having to rework their operating models,” said Felix Mogge, Partner at Roland Berger. “All the departments in a company have to understand the scale and the direction of the transformation—and adapt accordingly. Revenue sources, cost structures, and investments will change and will have to be rethought.”

Roland Berger’s concept for robustness entails six dimensions along which the situation of the 35 automotive-industry organizations was analyzed—with companies performing well in just two dimensions.

The Purpose, Culture, & Strategy dimension is a common objective, and good corporate culture is important in times of change, especially for automotive suppliers.

The Leadership & Talent dimension also revealed a further strength of suppliers as they often already make concerted efforts to support and develop their employees.

However, action is required in the following four dimensions of a robust organization.

Far-reaching transformations in the fields of electrification and software are leading to significant CAPEX and R&D expenditures. Therefore, further improvements are necessary for the Financing and Investments dimension, especially in liquidity management.

In the Process & Organizational Dynamics dimension, automotive suppliers are not yet fully exploiting their potential in knowledge exchange across departmental and function-based boundaries.

The establishment of Ecosystems and Networks within the industry is not yet at the reference level, although first partnerships and industry networks are becoming visible.

Regarding the Technology and Data dimension, the IT infrastructure is one key component that in many cases is not in line with the technological standards of the industry. However, many companies have identified this weakness and have already started work on rectifying it.

Roland Berger suggests a three-step approach to get an organization’s robustness journey started: a status quo assessment, a target definition, and the development of a detailed concept. To help a company achieve robustness, it offers a toolbox of solutions under the RO framework that provides a quick check of robustness for automotive suppliers, supporting the status quo assessment and giving examples of best practices for each dimension.

The assessment can be used as the basis for an in-depth review of a company’s current level of robustness and definition of a target ambition, followed by the development of a full action plan.